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BHP shares rise on robust output report

Peter Ker

BHP Billiton will need to lift its iron ore exports over the next six months if it is to meet guidance for the 2013 financial year, after its December quarter results fell short of the improvement some analysts were hoping for.

BHP's Pilbara operations produced an extra 3 million tonnes in the December quarter compared to the September quarter, but the 42.1 million tonnes attributable to the company was below the 49 million tonnes hoped for by some analysts.

The iron ore result was probably slightly disappointing by a couple of million tonnes.

Tim Schroeders, Pengana Capital

However, BHP shares reacted positively to the report, rising 31 cents, or 0.9 per cent, to $36.89 in morning trade.

The company has promised to produce 183 million tonnes in the 2013 financial year, meaning that about 55 per cent of that total will have to come in the second half of the year.

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But the company has recently installed new infrastructure at Port Hedland, including ship loaders, meaning it was today confident the 183 million tonne target would still be achieved.

As expected, petroleum output was down about 2 per cent, but BHP said its annual guidance also remained unchanged.

''The iron ore result was probably slightly disappointing by a couple of million tonnes,'' he told Sky News Business.

Strong copper result

The 295,000 tonnes of copper produced during the past three months was a strong result and keeps BHP well ahead in its copper numbers for the year.

With six months of the financial year remaining, BHP's copper production is already more than 10 per cent higher than it was at this time last year.

David Lennox from Fat Profits said copper would be the one division that BHP was "very happy with" on the back of today's results.

Production of coking coal over the past six months was slightly less than the volume produced over the same period in 2011, but BHP is performing better in thermal coal.

While the thermal coal division did not quite match its strong performance in the September quarter, it has still produced 7 per cent more tonnes than in the December half of 2011.

The company's thermal coal operations in New South Wales were a big part of that success.

Aluminium write-downs expected

BHP did not reveal any impairments this morning, but is expected to reveal write-downs on its aluminium and nickel businesses over the next month.

BHP also published an exploration report today, which showed that its shale drilling campaign in Texas continues apace, while on the minerals side the company's priority is the search for copper.

In the latter regard, BHP is matching the sentiments of Rio Tinto, which revealed last week that more than 40 per cent of its exploration spending was dedicated to searching for copper.

Copper is considered to have longer term prospects than iron ore in the context of the China boom, given it is used in many appliances and forms that reflect an improving standard of living.

Iron ore on the other hand is considered to be an "early cycle'' commodity given its prime usage is in construction, and BHP has previously said that it believes the peak of iron ore prices are in the past.

JPMorgan's Lyndon Fagan was happy with the iron ore result but said the collection of figures released by BHP today was unlikely to shift the market significantly.

''BHP’s quarterly contained the usual production ups & downs, and we don’t expect the share price to react materially to the announcement ... overall, it was a relatively clean result," he wrote.